Description
This is a presentation about proctor and gamble.
ORGANISATION CONFIGURATION
PROCESSES
? Focus on outputs
? Performance based portion of compensation for upper-
level executives increased
? Corporate centre can choose performance targets to control
the business units within P&G without getting involved in the details of how the business units achieve the targets.
? Recommendation : Use Balanced Scorecard techniques to
set targets
RELATIONSHIP MANAGEMENT
? Devolution : extent to which the centre of an
organization delegates decision making to units and managers lower down in the hierarchy.
? In P&G, many decisions that had once been made by
committee are now assigned to individuals.
P&G – Touching Lives, Improving Life
Purpose Statement
“We will provide branded products and services of superior quality and value that improve the lives of the world’s consumers, now and for generations to come. As a result, consumers will reward us with leadership sales, profit and value creation, allowing our people, our shareholders and the communities in which we live and work to prosper.”
P&G1837 by William(1837-1948) History Procter & James Gamble ? Founded in
? Faced stiff competition from other similar local
manufacturers ? Factors contributing to P&G’s success during this period
? Product Innovation (Ivory) ? Diversification in various consumer goods industries ? Direct Sales Distribution ? Centralized and self directed R&D department (Tide
and Fluoride Toothpaste)
STRATEGIES Introduction Strategies Reasons for
Employed aggressive investment strategy (despite war conditions) by setting up large factory and providing high quality products with unique packaging Creation of profit sharing programs for employees in 1890 To differentiate its products from that of the local competition
To maintain harmony with the workforce (The company still pays such dividends to employees) To gain more insights about retail customers To be able to synchronize their production more closely to market demand
Introduction of Direct sales force in ? 1919, bypassing wholesalers in supply chain ?
STRATEGIES Contd… Strategies Reasons for Introduction
Institutionalization of Competitive To encourage entrepreneurial spirit Brand Management in 1931 among managers and focussed attention to each brand Organization structure set up around To facilitate quick and more customerproduct lines focused business decisions at lower end of corporate hierarchy itself
ORGANIZATIONAL STRUCTURE UNITED STATES
DIVISIONAL STRUCTURE – 1955
Strategy ? To create individual operating divisions with brand management and functional capabilities. Reason ? To better manage the growing portfolio of products.
ORGANIZATIONAL STRUCTURE UNITED STATES
MATRIX STRUCTURE – 1987
Strategy ? Introduction of Category Business Units. Reasons ? To provide more differentiated functional activities for each category, flexibility and better knowledge sharing.
ORGANIZATIONAL STRUCTURE WESTERN EUROPE
DECENTRALIZED HUB AND SPOKE MODEL
Strategy ? Creating ‘mini - US es’ in each country. Reasons ? To tailor products and processes to local tastes.
ORGANIZATIONAL STRUCTURE WESTERN EUROPE
CATEGORY MANEGEMENT – Early 1980s
Strategy ? Shifting focus from country management to category management Reasons ? To achieve standardization in processes and avoid duplication of efforts in each new product initiative.
WHY DIFFERENT ORGANIZATIONAL STRUCTURES IN US AND EUROPE?
WESTERN EUROPE ? Diverse market. ? Required country specific focus.
US ? Homogenous market ? Adaptive to nationwide brand and product division management.
GLOBAL MATRIX (1987-1995)
Why Global Matrix?
? Expansion into Japan and developing countries
? To cater to diverse consumer tastes and income levels
? To strengthen the global corporate functions
REPORTING STRUCTURE ? Regional Hierarchy
? Functional Hierarchy
? Global Product Categories ? Top Level Reporting
Full line Reporting
? Profit & Loss Responsibility
Dotted Line Reporting
? Cross regional coordination/influence on decision making
process
STRATEGIES Introduction Strategies Reasons for
Move from European Globalization To be able to sustain the challenges of model to Global Matrix Model expansion in Japan and developing markets
Creation of Global Category presidencies To apply global branding strategies and and separate globalized corporate R&D to better coordinate category strategies VP functions worldwide. Strengthening the Global Effectiveness To integrate the acquired companies’ (SGE) restructuring program in 1993 supply chain to the existing manufacturing & distribution system smoothly. Transforming global sales organization To develop closer global relationships into Customer Business Development with customers (CBD) function
BENEFITS Bottom-line ? Improvement in P&G’s Top-line and
? Powerful and independent global functions led to ? Pooling of knowledge ? Transfer of best practices ? Elimination of intraregional redundancies ? Standardization of activities ? Global Product Supply function resulted in massive
savings for the company
BENEFITSjoint strategic planning Contd… ? Closer global relations and
(on account of CBD) with customers
? Acceleration in standardization and launch of
products globally
PROBLEMS WITH GLOBAL MATRIX (1995-1998) functional ? In the long run, the matrix become
dominant ? Functional strategic agenda rather than company’s became more important ? Increasing disagreements between regional and functional functions led to delayed product launched thereby losing ground to the company’s competition ? Created too many profit centres that became difficult to manage
WHY DID GLOBAL MATRIX FAIL?
? Inter departmental squabbles took a toll on Innovation
? 2D structure led to confusion in the minds of the
employees ? Poor collaborative relationships between senior managers ? To sum it up - Matrix was implemented without keeping in mind all the complexities involved
WHAT WAS P&G’S RESPONSE TO THE FAILURE OF MATRIX?
? Launch of Organization 2005
? The change involved ? Establishing a multi-divisional structure for its GBUs
? Regional
consolidation of customer development functions into MDOs
business
? Leveraging the power of IT by centralizing IT support
and responsibility into one GBS
HOW WAS ORGANIZATION 2005 BETTER?
? Flexibility – In future GBUs can be added, merged,
? ? ? ?
removed easily Monitoring is much easier with a multidivisional structure as compared to a matrix structure Managers have a greater personal ownership in a multidivisional structure Global leadership council and the Technology council fostered organization wide information sharing Greater support to the profit and loss centers by functions like GBS and Finance
ORGANIZATION 2005 – Some Facts
? Launched in September 1998
? It was a six year restructuring plan ? Estimated cost $1.9Billion spread over 5 years
? Estimated after tax savings by 2004 - $0.9Billion
? Focus was on to improve the speed with which P&G
innovated and globalized its innovations
? Consistent Sales growth estimate 6-8%
? Consistent Profit growth of 13-15%
THE FOUR PILLARS
STRATEGIES
Strategies
Move from the Global Matrix structure to Multidivisional structure of GBUs Elimination of 6 management layers
Reasons for Introduction
Matrix structure too complex to operate due to large number of geographies and products 1. Easier flow of information between layers 2. Greater sense of responsibility for each manager 3. Tall organization changed to a flatter organization 4. Faster global roll out of innovations and brands
STRATEGIES contd…
Strategies
Separate management of the New Business Development Function of the GBU from the rest of the GBU All 14 presidents of GBUs and MDOs were made members of the global leadership council All 7 GBU R&D VPs formed the Technology Council Consolidate MDOs region wise
Reasons for Introduction
To foster innovation without any outside pressures To foster intra division communication
To foster knowledge sharing Long term strategy to create and maintain a sustainable competitive advantage
GBUs
GENERAL ROLE ? Create strong brand equities, robust strategies and ongoing innovation in products and marketing to build major global brands
PHILOSOPHY ? Think Globally
MDOs
GENERAL ROLE ? Interface with customers to ensure that marketing plans fully capitalize on local understanding, to seek synergy across programs to leverage corporate scale, and to develop strong programs that change the game in our favour at point-of-purchase PHILOSOPHY ? Act Locally
GBS
GENERAL ROLE ? Provide services and solutions that enable the company to operate efficiently around the world, collaborate effectively with business partners, and help employees become more productive
PHILOSOPHY ? Enabling P&G to win with Customers and Consumers
Corporate Functions
GENERAL ROLE ? Ensure that the functional capability integrated into the rest of the company remains on the cutting edge of the industry. We want to be the thought leader within each CF
PHILOSOPHY ? Be the Smartest and the Best
Net Sales
Net Sales
41,000 40,000 39,000 38,000 37,000 36,000 35,000 34,000 33,000 32,000 35,284 35,764 37,154 38,125 39,951
1996
1997
1998
1999
2000
Net Sales
Durk Jager allocated a large share of P&G’s resources to GBU NBD groups and a Corporate New Ventures function, which led to development of several new categories and brands which eventually resulted in increase in sales by 5 percent.
Gross Profit
Gross Profit
20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 18,933 15,254 14,346 16,258 17,098
1996
1997
1998
1999
2000
Gross Profit
Druk Jager frequently scrutinized P&G’s R&D portfolio and personally stewarded new technologies through the pipeline that he felt were promising. The introduction of new product line led to the increase in gross profit by 10.73%, excluding the restructuring costs.
Net Income From Continued Operations
Net Income from Continued Operations
4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 3,415 3,046 3,780 3,763 3,542
1996
1997
1998
1999
2000
Net Income from Continued Operations
Though Febreeze, Swiffer and Dryel Fit have contributed sufficiently to the net income of P&G, the continuing operations have declined by 6 percent.
Net Sales
Fabric and Home Care - Net Sales
4,660 13,000 12,000 11,000 10,000 1998 1999 2000 Fabric and Home Care - Net Sales Food & Beverage - Net Sales 11,019 11,415 12,157 4,640 4,620 4,600 1998 1999 2000 4,620
Food & Beverage - Net Sales
4,655 4,634
The introduction of new products in Fabric and Home Care led to the increase in net sales by 6.5% while the Food & Beverage has shown a decline.
Net Sales
Beauty Care - Net Sales
7,500 7,400 7,300 1998 1999 2000 7,469 7,376 7,389
Health Care - Net Sales
4,000 2,000 0 1998 1999 2000 2,889 2,876 3,909
Paper - Net Sales
12,500 12,000 11,500 11,000 1998 1999 2000 11,685 12,190 12,044
Beauty Care - Net Sales
Health Care - Net Sales
Paper - Net Sales
With the introduction of Thermacare products in the Health Care sector, P&G has seen a surge in its net sales by 36 percent whereas Beauty Care and Paper division has seen a dip in the net sales. Thus Organization 2005 strategy has affected the net sales and the overall profit for P&G.
Ebit
Food and Beverage - EBIT
600 550 500 477 566 1,500 1,450 1,400 1,350 1,300 1998 1999 2000 1998 1999 Beauty Care - EBIT 2000 1,379
Beauty Care - EBIT
1,457 1,393
528
450 400
Food and Beverage - EBIT
Introduction of Torengos and cooking schools in Snacks and Beverages section implemented in the new Organization 2005 structure led to 7 percent increase in the EBIT whereas Beauty Care saw a constant sales but a considerable decline in earnings.
doc_365328944.pptx
This is a presentation about proctor and gamble.
ORGANISATION CONFIGURATION
PROCESSES
? Focus on outputs
? Performance based portion of compensation for upper-
level executives increased
? Corporate centre can choose performance targets to control
the business units within P&G without getting involved in the details of how the business units achieve the targets.
? Recommendation : Use Balanced Scorecard techniques to
set targets
RELATIONSHIP MANAGEMENT
? Devolution : extent to which the centre of an
organization delegates decision making to units and managers lower down in the hierarchy.
? In P&G, many decisions that had once been made by
committee are now assigned to individuals.
P&G – Touching Lives, Improving Life
Purpose Statement
“We will provide branded products and services of superior quality and value that improve the lives of the world’s consumers, now and for generations to come. As a result, consumers will reward us with leadership sales, profit and value creation, allowing our people, our shareholders and the communities in which we live and work to prosper.”
P&G1837 by William(1837-1948) History Procter & James Gamble ? Founded in
? Faced stiff competition from other similar local
manufacturers ? Factors contributing to P&G’s success during this period
? Product Innovation (Ivory) ? Diversification in various consumer goods industries ? Direct Sales Distribution ? Centralized and self directed R&D department (Tide
and Fluoride Toothpaste)
STRATEGIES Introduction Strategies Reasons for
Employed aggressive investment strategy (despite war conditions) by setting up large factory and providing high quality products with unique packaging Creation of profit sharing programs for employees in 1890 To differentiate its products from that of the local competition
To maintain harmony with the workforce (The company still pays such dividends to employees) To gain more insights about retail customers To be able to synchronize their production more closely to market demand
Introduction of Direct sales force in ? 1919, bypassing wholesalers in supply chain ?
STRATEGIES Contd… Strategies Reasons for Introduction
Institutionalization of Competitive To encourage entrepreneurial spirit Brand Management in 1931 among managers and focussed attention to each brand Organization structure set up around To facilitate quick and more customerproduct lines focused business decisions at lower end of corporate hierarchy itself
ORGANIZATIONAL STRUCTURE UNITED STATES
DIVISIONAL STRUCTURE – 1955
Strategy ? To create individual operating divisions with brand management and functional capabilities. Reason ? To better manage the growing portfolio of products.
ORGANIZATIONAL STRUCTURE UNITED STATES
MATRIX STRUCTURE – 1987
Strategy ? Introduction of Category Business Units. Reasons ? To provide more differentiated functional activities for each category, flexibility and better knowledge sharing.
ORGANIZATIONAL STRUCTURE WESTERN EUROPE
DECENTRALIZED HUB AND SPOKE MODEL
Strategy ? Creating ‘mini - US es’ in each country. Reasons ? To tailor products and processes to local tastes.
ORGANIZATIONAL STRUCTURE WESTERN EUROPE
CATEGORY MANEGEMENT – Early 1980s
Strategy ? Shifting focus from country management to category management Reasons ? To achieve standardization in processes and avoid duplication of efforts in each new product initiative.
WHY DIFFERENT ORGANIZATIONAL STRUCTURES IN US AND EUROPE?
WESTERN EUROPE ? Diverse market. ? Required country specific focus.
US ? Homogenous market ? Adaptive to nationwide brand and product division management.
GLOBAL MATRIX (1987-1995)
Why Global Matrix?
? Expansion into Japan and developing countries
? To cater to diverse consumer tastes and income levels
? To strengthen the global corporate functions
REPORTING STRUCTURE ? Regional Hierarchy
? Functional Hierarchy
? Global Product Categories ? Top Level Reporting
Full line Reporting
? Profit & Loss Responsibility
Dotted Line Reporting
? Cross regional coordination/influence on decision making
process
STRATEGIES Introduction Strategies Reasons for
Move from European Globalization To be able to sustain the challenges of model to Global Matrix Model expansion in Japan and developing markets
Creation of Global Category presidencies To apply global branding strategies and and separate globalized corporate R&D to better coordinate category strategies VP functions worldwide. Strengthening the Global Effectiveness To integrate the acquired companies’ (SGE) restructuring program in 1993 supply chain to the existing manufacturing & distribution system smoothly. Transforming global sales organization To develop closer global relationships into Customer Business Development with customers (CBD) function
BENEFITS Bottom-line ? Improvement in P&G’s Top-line and
? Powerful and independent global functions led to ? Pooling of knowledge ? Transfer of best practices ? Elimination of intraregional redundancies ? Standardization of activities ? Global Product Supply function resulted in massive
savings for the company
BENEFITSjoint strategic planning Contd… ? Closer global relations and
(on account of CBD) with customers
? Acceleration in standardization and launch of
products globally
PROBLEMS WITH GLOBAL MATRIX (1995-1998) functional ? In the long run, the matrix become
dominant ? Functional strategic agenda rather than company’s became more important ? Increasing disagreements between regional and functional functions led to delayed product launched thereby losing ground to the company’s competition ? Created too many profit centres that became difficult to manage
WHY DID GLOBAL MATRIX FAIL?
? Inter departmental squabbles took a toll on Innovation
? 2D structure led to confusion in the minds of the
employees ? Poor collaborative relationships between senior managers ? To sum it up - Matrix was implemented without keeping in mind all the complexities involved
WHAT WAS P&G’S RESPONSE TO THE FAILURE OF MATRIX?
? Launch of Organization 2005
? The change involved ? Establishing a multi-divisional structure for its GBUs
? Regional
consolidation of customer development functions into MDOs
business
? Leveraging the power of IT by centralizing IT support
and responsibility into one GBS
HOW WAS ORGANIZATION 2005 BETTER?
? Flexibility – In future GBUs can be added, merged,
? ? ? ?
removed easily Monitoring is much easier with a multidivisional structure as compared to a matrix structure Managers have a greater personal ownership in a multidivisional structure Global leadership council and the Technology council fostered organization wide information sharing Greater support to the profit and loss centers by functions like GBS and Finance
ORGANIZATION 2005 – Some Facts
? Launched in September 1998
? It was a six year restructuring plan ? Estimated cost $1.9Billion spread over 5 years
? Estimated after tax savings by 2004 - $0.9Billion
? Focus was on to improve the speed with which P&G
innovated and globalized its innovations
? Consistent Sales growth estimate 6-8%
? Consistent Profit growth of 13-15%
THE FOUR PILLARS
STRATEGIES
Strategies
Move from the Global Matrix structure to Multidivisional structure of GBUs Elimination of 6 management layers
Reasons for Introduction
Matrix structure too complex to operate due to large number of geographies and products 1. Easier flow of information between layers 2. Greater sense of responsibility for each manager 3. Tall organization changed to a flatter organization 4. Faster global roll out of innovations and brands
STRATEGIES contd…
Strategies
Separate management of the New Business Development Function of the GBU from the rest of the GBU All 14 presidents of GBUs and MDOs were made members of the global leadership council All 7 GBU R&D VPs formed the Technology Council Consolidate MDOs region wise
Reasons for Introduction
To foster innovation without any outside pressures To foster intra division communication
To foster knowledge sharing Long term strategy to create and maintain a sustainable competitive advantage
GBUs
GENERAL ROLE ? Create strong brand equities, robust strategies and ongoing innovation in products and marketing to build major global brands
PHILOSOPHY ? Think Globally
MDOs
GENERAL ROLE ? Interface with customers to ensure that marketing plans fully capitalize on local understanding, to seek synergy across programs to leverage corporate scale, and to develop strong programs that change the game in our favour at point-of-purchase PHILOSOPHY ? Act Locally
GBS
GENERAL ROLE ? Provide services and solutions that enable the company to operate efficiently around the world, collaborate effectively with business partners, and help employees become more productive
PHILOSOPHY ? Enabling P&G to win with Customers and Consumers
Corporate Functions
GENERAL ROLE ? Ensure that the functional capability integrated into the rest of the company remains on the cutting edge of the industry. We want to be the thought leader within each CF
PHILOSOPHY ? Be the Smartest and the Best
Net Sales
Net Sales
41,000 40,000 39,000 38,000 37,000 36,000 35,000 34,000 33,000 32,000 35,284 35,764 37,154 38,125 39,951
1996
1997
1998
1999
2000
Net Sales
Durk Jager allocated a large share of P&G’s resources to GBU NBD groups and a Corporate New Ventures function, which led to development of several new categories and brands which eventually resulted in increase in sales by 5 percent.
Gross Profit
Gross Profit
20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 18,933 15,254 14,346 16,258 17,098
1996
1997
1998
1999
2000
Gross Profit
Druk Jager frequently scrutinized P&G’s R&D portfolio and personally stewarded new technologies through the pipeline that he felt were promising. The introduction of new product line led to the increase in gross profit by 10.73%, excluding the restructuring costs.
Net Income From Continued Operations
Net Income from Continued Operations
4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 3,415 3,046 3,780 3,763 3,542
1996
1997
1998
1999
2000
Net Income from Continued Operations
Though Febreeze, Swiffer and Dryel Fit have contributed sufficiently to the net income of P&G, the continuing operations have declined by 6 percent.
Net Sales
Fabric and Home Care - Net Sales
4,660 13,000 12,000 11,000 10,000 1998 1999 2000 Fabric and Home Care - Net Sales Food & Beverage - Net Sales 11,019 11,415 12,157 4,640 4,620 4,600 1998 1999 2000 4,620
Food & Beverage - Net Sales
4,655 4,634
The introduction of new products in Fabric and Home Care led to the increase in net sales by 6.5% while the Food & Beverage has shown a decline.
Net Sales
Beauty Care - Net Sales
7,500 7,400 7,300 1998 1999 2000 7,469 7,376 7,389
Health Care - Net Sales
4,000 2,000 0 1998 1999 2000 2,889 2,876 3,909
Paper - Net Sales
12,500 12,000 11,500 11,000 1998 1999 2000 11,685 12,190 12,044
Beauty Care - Net Sales
Health Care - Net Sales
Paper - Net Sales
With the introduction of Thermacare products in the Health Care sector, P&G has seen a surge in its net sales by 36 percent whereas Beauty Care and Paper division has seen a dip in the net sales. Thus Organization 2005 strategy has affected the net sales and the overall profit for P&G.
Ebit
Food and Beverage - EBIT
600 550 500 477 566 1,500 1,450 1,400 1,350 1,300 1998 1999 2000 1998 1999 Beauty Care - EBIT 2000 1,379
Beauty Care - EBIT
1,457 1,393
528
450 400
Food and Beverage - EBIT
Introduction of Torengos and cooking schools in Snacks and Beverages section implemented in the new Organization 2005 structure led to 7 percent increase in the EBIT whereas Beauty Care saw a constant sales but a considerable decline in earnings.
doc_365328944.pptx